Complex Made Simple

Six in 10 UAE workers reliant on gratuity payment to fund retirement

New research* from Old Mutual International and Quilter Cheviot highlights the major role end-of-service benefits play in the retirement plans of workers in the UAE.

Nearly nine in 10 individuals (84%) say they will receive an end-of-service gratuity when leaving their company, the value of which exceeds AED20,000  ($5,450) for most respondents (62%).

Most expats in the region will get a gratuity payment when retiring from a company they have worked at for more than a year. However, there are some instances when the gratuity could be withheld, with the most common reason being some form of breach of contract.

The majority (62%) of respondents stated that they want to retire in their home country. However, the survey was conducted soon after the UAE took the decision to introduce a new five-year visa for expat retirees older than 55, which may mean in the future more people choose to stay in the UAE for their retirement.

The results of the survey show that the UAE’s popularity as a retirement destination may already be on the rise as in 2018, 18% of respondents said that they would retire in the UAE, compared to 15% in 2017.

However, a staggering  8 out of 10 people living in the UAE plan to continue working in retirement, either for social (45%) or financial  (35%) reasons, with all (81%) saying they expect to be self-employed.

Read: Is your retirement package guaranteed in the UAE?

In 2017, 43% of respondents expected to retire between the ages of 50-55 however according to the results of the 2018 survey this has now dropped to 35% with many more people believing they were likely to have to retire later in their life. Nearly half (47%) of respondents are expecting retirement to last between 11 and 20 years.

Paul Evans, head of region, Middle East & Africa, Old Mutual International, comments:

“Gone are the days of someone receiving a gold watch on the day they retire and then solely relying on their pension for the rest of their life. Instead, as our research shows people may choose to work part-time or even in a self-employed capacity. These new practices mean that creating a financial plan, which takes into account someone’s unique circumstances, is more crucial than ever.

“The fact that 59% of respondents are either fully or partly relying on their end-of-service gratuity for retirement could be a cause for concern, as the research shows that on average they are relatively small payments. A holistic financial plan which accounts for this gratuity but also looks at any other income streams will help someone prepare for their aspired wealth in retirement.”

Read: If you live in the UAE, new survey finds that your retirement looks bleak

Mark Leale, head of Quilter Cheviot’s Dubai representative office, adds:

“It’s fascinating that 81 % of people living in the UAE plan to be self-employed in retirement. Working in retirement, particularly on a self-employed basis, can be a positive experience, as it keeps people social and active. However, being self-employed also presents some challenges and anyone interested in taking on self-employed work to fund their retirement must have a financial plan in place, which takes into account the possibility that they physically could no longer be able to earn as they get older.

“The UAE has a dynamic and ever-changing retirement landscape especially considering its recent decision to introduce a new five-year visa for expat retirees older than 55 which may make it a more popular retirement destination than ever. With this in mind, anyone who is looking to retire in the region must understand how their end-of-service gratuity will add to their overall retirement plan and invest and save accordingly.”

*Old Mutual International and Quilter Cheviot investment and retirement research, August 2018. A targeted piece of research, aimed specifically at investors living in the UAE (mainly Dubai and Abu Dhabi) who use the services of a professional to invest in the stock market. Investors needed to have a minimum of $50,000 invested. 130 responses were received in total and were a representative cross-section of those living in the UAE (expats, NRIs, and GCC Nationals).

About Old Mutual International, Quilter Cheviot, and Quilter plc:

Old Mutual International is a leading cross-border provider of wealth management solutions and part of Quilter plc.

Quilter Cheviot is one of the UK’s largest discretionary investment management firms with over £24.4 billion of assets under management (As at 30 September 2018).